DECEMBER 2013
Realizing Health Reform’s Potential
What States Are Doing to Simplify Health Plan
Choice in the Insurance Marketplaces
Christine H. Monahan, Sarah J. Dash, Kevin W. Lucia,
and Sabrina Corlette
The mission of The Commonwealth Fund is
to promote a high performance health care
system. The Fund carries out this mandate by
supporting independent research on health
care issues and making grants to improve
health care practice and policy. Support for this
research was provided by The Commonwealth
Fund. The views presented here are those of
the authors and not necessarily those of The
Commonwealth Fund or its directors, officers,
or staff.
Abstract: The new health insurance marketplaces aim to improve consumers’ purchasing
experiences by setting uniform coverage levels for health plans and giving them tools to
explore their options. Marketplace administrators may choose to limit the number and
type of plans offered to further simplify consumer decision-making. This issue brief examines the policies set by some state-based marketplaces to simplify plan choices: adopting
a meaningful difference standard, limiting the number of plans or benefit designs insurers may offer, or requiring standardized benefit designs. Eleven states and the District of
Columbia took one or more of these actions for 2014, though their policies vary in terms
of their prescriptiveness. Tracking the effects of these different approaches will enhance
understanding of how best to enable consumers to make optimal health insurance purchasing decisions and set the stage for future refinements.
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OVERVIEW
For more information about this study,
please contact:
Sarah J. Dash, M.P.H.
Research Fellow
Center on Health Insurance Reforms
Georgetown University Health Policy Institute
[email protected]
To learn more about new publications
when they become available, visit the Fund's
website and register to receive email alerts.
Commonwealth Fund pub. 1720
Vol. 34
Purchasing health insurance is an extraordinarily complex process, with much at
stake for consumers’ financial protection and access to care.1 To simplify the consumer shopping experience and set basic standards for plans, the Affordable Care
Act introduces significant health insurance market reforms and establishes health
insurance marketplaces (also referred to as exchanges), where consumers can compare and choose plans based on their overall cost and quality.2 To help consumers understand the level of protection they are purchasing, health plans offered
through the marketplaces must cover a largely similar set of essential health benefits and are categorized into levels—catastrophic, bronze, silver, gold, and platinum—based on the average percentage of health care expenses that will be paid
for by the insurer.3 The marketplaces will further enable consumers to compare
and select plans through Web-based display, filter, and search functions—known
as “choice architecture”—as well as through tools, such as a Summary of Benefits
and Coverage, that provide standardized plan information.4
With these changes, consumers will have access to more comprehensive
coverage and more information about their plan options than have traditionally been available.5 However, significant variation in health plan design—for
2
The Commonwealth Fund
instance, differing amounts of cost-sharing for specific
services—may still occur. Experience with implementation of health insurance reform in Massachusetts,
as well as with implementation of Medicare Part D
and Medicare Advantage, provide some perspective:
if insurers are given significant latitude to vary plan
features or offer numerous plans with only minor differences between them, consumers might still have
difficulty making comparisons and selecting a plan that
offers them adequate financial protection and access to
care at the best possible price.6
Whether state insurance marketplaces should
seek to simplify plan choices to help consumers make
optimal choices has been the subject of robust debate.
Insurers have tended to support greater flexibility,
emphasizing innovation and the diversity of consumer
preferences. Consumer advocates, citing behavioral economics research demonstrating that having too many
choices can impair decision-making, have encouraged
measures to provide a manageable number of easily
comparable options.7 In determining their approach,
marketplace administrators must contend with the twin
challenges of “stocking the shelves” with enough plans
to promote competition and consumer choice while
ensuring that the number and variety of plans are not
so overwhelming that consumers have difficulty identifying those that best fit their needs.
States running their own marketplaces have
significant flexibility in how they balance these competing pressures.8 This issue brief examines whether
and how state-based marketplaces have taken any of
three actions to simplify plan choices: 1) limiting the
number of plans or benefit designs insurers may offer,
2) requiring standardized benefit designs, or 3) adopting a meaningful difference standard (Exhibit 1). These
actions, while not required by the Affordable Care Act,
may help consumers by creating a more transparent
and competitive shopping experience.
FINDINGS
Eleven States and the District of Columbia
Took Some Action to Simplify Plan Choice
Eleven states and the District of Columbia took action
to simplify plan choices in their marketplaces. The
level of intervention varied, with some states giving
significant discretion to insurers and others being more
prescriptive. Four states and the District of Columbia
took just one action—either adopting a meaningful
difference standard or limiting the number of plans or
benefit designs an insurer may offer.9 Seven states took
at least two actions, with four states taking all three. Six
states did not take any action to structure plan choices
(Exhibit 2). The federal government—which has
adopted similar approaches in the Medicare Advantage
and Medicare Part D programs—will manage plan
choices in states using the federally facilitated marketplace by deploying just one of the above tools: requiring
insurers’ plan offerings to meet a meaningful difference
standard.10
Exhibit 1. Policy Options to Simplify Marketplace Plan Choice
Action
Description
Limit Number of Plans
or Benefit Designs
Limit the number of plans that insurers may offer within a specified geographic area within
an individual or Small Business Health Options Program (SHOP) exchange, or limit the
number of benefit designs while allowing insurers to offer multiple plans for each benefit
design within the same area using different product types (e.g., health maintenance
organization or preferred provider organization) and/or networks.
Standardize Benefit
Designs
Require insurers to offer plans that reflect, at minimum, predefined deductibles, out-ofpocket maximums, and in-network cost-sharing amounts for some or all essential health
benefits. Insurers may vary plan features that are not included in the standardized design,
such as product type and networks.
Adopt Meaningful
Difference Standard
Require a plan’s features, such as cost-sharing levels, scope of covered services, or networks,
to be substantially distinct from those of other plans offered in the same area by the same
insurer.
What States Are Doing to Simplify Health Plan Choice in the Insurance Marketplaces
Market dynamics were paramount in some
states’ decisions to act. Officials in Rhode Island, which
did not take any formal action, reported that they did
not set explicit limits on the number of plans offered
but instead encouraged insurers to offer a limited number. Given Rhode Island’s small market, their priority
for year one was to get all insurers on board to ensure
consumers “had enough choice.”11 Washington State
officials similarly noted that they were more concerned
with getting all insurers to participate in the marketplace and offer plans throughout the state than with
insurers “flooding the market” and overwhelming
consumers.12
3
In states that took a proactive approach to managing plan choices, officials emphasized the importance
of promoting informed consumer choice through benefit standardization and providing a reasonable number
of plan options.13 In New York, for example, officials
expressed a concern that, without limits, the choices
in the marketplace would be “endless.”14 In Nevada,
officials have generally taken a “free market facilitator”
approach but, out of concern that too many plans could
discourage some consumers from making any choice at
all, they adopted plan limits and a meaningful difference standard to “push” the market toward more manageable consumer choice.15
Exhibit 2. State and Federal Action to Simplify Marketplace Plan Choice
Number of Actions Taken
Three Actions
Two Actions
1
One Action
No Action
Total States Taking Action
1
State
Limited Number
of Plans or
Benefit Designs
Standardized
Benefit Designs
Adopted Meaningful
Difference Standard
CA
X
X
X
CT
X
X
X
MA
X
X
X
VT
X
X
X
NV
X
—
X
NY
X
X
—
OR
X
X
—
CO
—
—
X2
DC
—
—3
X
KY
X
—
—
MD
X
—
—
UT
—
—
X
HI
—
—
—
ID
—
—
—
MN
—
—
—
NM
—
—
—
RI
—
—
—
WA
—
—
—
9
6
8
The federally facilitated marketplace implemented a meaningful difference standard for 2014. Although not reviewed for the purposes of this paper, states
conducting plan management on behalf of the federally facilitated marketplace also may take actions to manage plan choices in addition to conducting a
meaningful difference review. In states not conducting plan management for the federally facilitated marketplace, review for meaningful difference is the
only action to manage plan choices in 2014.
2
In Colorado, meaningful difference standards also apply to individual and small-group plans offered outside of the exchange.
3
The District of Columbia intends to require insurers to offer standardized plans beginning in 2015.
4
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Nine States Are Limiting the Number of
Plans or Benefit Designs an Insurer Can Have
To prevent insurers from flooding the exchange with a
large number of plans—potentially dominating “shelf
space” on marketplace websites and, thus, reducing
competition and impairing consumer decision-making—nine states limited the number of plans or benefit
designs insurers may offer (Exhibit 3). Of these, two
states—Kentucky and Maryland—did not take any
other action to simplify plan choices. Nevada combined
limits with a meaningful difference standard. Of the
remaining six states, four (California, Connecticut,
Massachusetts, and Vermont) also required insurers to
standardize a subset of plans and set meaningful different standards, while two (New York and Oregon) also
required insurers to standardize a subset of plans.
States typically allowed insurers to offer between
three and five plans per coverage level. California, in
contrast, limited the number of different configurations of the covered benefits and cost-sharing (benefit
designs) an insurer may offer. Participating insurers,
however, may submit an unlimited number of plans
using different networks or product types—such as
health maintenance organizations (HMOs) or preferred provider organizations (PPOs)—for each benefit
design offered on the exchange.16 For example, for a
single benefit design, a California insurer may offer one
plan with a broad provider network and another with a
more restricted network. Massachusetts combined both
approaches, restricting the total number of nonstandardized plans insurers may offer while allowing insurers to submit an unlimited number of standardized
plans with different network configurations.17
Exhibit 3. Maximum Number of Plans or Benefit Designs Allowed per Insurer in Marketplaces
Maximum*
State
Applicability
Not applicable1
FFM States No limit on number of plans or benefit designs
CA
CT
KY
MD
One nonstandardized benefit design per coverage level2
Per service area
3
Per market
4
Per market
3 plans per coverage level
4 plans per coverage level
4
4 plans per coverage level
Per market
MA
7 non-standardized plans across bronze, silver, gold, and platinum coverage levels
Per exchange6
NV
5 plans per coverage level
Per service area
NY
4,5
4,7
4 plans per coverage level
3
Per county
OR
5 plans per coverage level
Per service area
VT
4 plans per bronze and silver levels; 3 plans per gold level; 1 plan per platinum and
catastrophic levels7
Per exchange6
* Numbers presented do not necessarily include variations of a single plan, such as certain plan variations that provide publicly subsidized cost-sharing
protection to eligible low-income individuals, child-only variations, and variations of the same plan provided with and without embedded pediatric dental
coverage. States typically did not include such plans for the purposes of calculating plan limits.
FFM = federally facilitated marketplace.
1
Although not reviewed for purposes of this paper, states conducting plan management on behalf of the federally facilitated marketplace also may take
actions to manage plan choices in addition to conducting a meaningful difference review.
2
In California, the exchange limited the number of nonstandardized benefit designs an insurer can offer per coverage level, but insurers may submit
multiple plans for each standard and alternative benefit design within the same geographic service area using different product types and/or networks.
3
In Connecticut and Oregon, insurers are limited to one catastrophic plan in the applicable area. For the bronze, silver, and gold coverage levels, Oregon
specified that each qualified health plan issuer could offer one standardized plan, two nonstandardized plans per coverage level, and two “innovative”
plans per coverage level. Like the nonstandardized plans, the “innovative plans” would not be required to comply with the standardized benefit design, but
would be subject to an additional layer of review and approval by the exchange before they could be filed with the state insurance division. Oregon did not
establish a standardized benefit design for the platinum level and allowed insurers to offer up to three nonstandardized platinum plans and two “innovative”
platinum plans.
4
In Kentucky, Maryland, Massachusetts, and New York, plan limits do not apply to catastrophic plans.
5
In Massachusetts, plan limits do not apply to standardized plans—as in California, insurers may submit multiple plans for each standardized benefit design
using multiple network configurations.
6
“Per exchange” refers to the individual and small-group exchanges established in each state. In Massachusetts and Vermont, the individual and small-group
markets are merged so plan limits apply to insurer participation in the exchange generally, rather than per market.
7
In New York and Vermont, affiliated insurers will be considered one entity for purposes of calculating plan limits.
What States Are Doing to Simplify Health Plan Choice in the Insurance Marketplaces
With either method, the number and variety of
plans offered to consumers will depend, in part, on how
limits are applied. In Kentucky, for example, insurers
may offer only four plans at each coverage level statewide. In contrast, insurers participating in the marketplace in Oregon may offer up to five plans per coverage
level in each service area in which they operate, giving
them flexibility to design unique products within different service areas. States may also apply limits at
the license or holding company level. For example,
Maryland took the former approach while New York
and Vermont took the latter, specifying that any insurers that are operating on different licenses but affiliated
with the same holding company will be considered one
entity for the purposes of calculating plan limits.18
Six States Established Standardized Benefit
Designs to Support “Apples-to-Apples”
Comparisons
Six states—California, Connecticut, Massachusetts,
New York, Oregon, and Vermont—required insurers
to offer a selection of plans with standardized benefit
5
designs so consumers can more easily compare features such as benefits and cost-sharing among plans
across different levels of coverage (Exhibit 4). In all six
states, insurers are allowed to offer a limited number
of nonstandardized plans or benefit designs. For such
products, states often explicitly encouraged insurers to incorporate innovative features, such as valuebased insurance design, tiered networks, and payment
and delivery system reforms.19 Four of the six states
(California, Connecticut, Massachusetts, and Vermont)
also adopted meaningful difference standards to differentiate nonstandardized plans.
In defining their standardized benefit designs,
all six states fixed deductibles and out-of-pocket
maximums for in-network benefits, and many set innetwork cost-sharing for most or all essential health
benefits, including specific services such as ambulance
or other forms of emergency transport. These steps
provide consumers with a stable basis for comparing
out-of-pocket costs for a broad array of health care
services across coverage levels. Other states, such as
Massachusetts, standardized only a subset of essential
Exhibit 4. Approaches to Standardizing Plan Benefit Designs in Insurance Marketplaces
Range of Standardized
Benefit Designs
In-Network
Cost-Sharing
Standardized
Out-of-Network
Cost-Sharing
Standardized
Benefit Substitution
Prohibited
N/A
N/A
N/A
No1
CA
All coverage levels
Yes
No
Yes2
CT
All coverage levels
except catastrophic
Yes
Yes
Yes2
MA
All coverage levels
except catastrophic
Yes
No3
No
NY
All coverage levels
Yes
No
Yes4
OR
Bronze, silver, and gold
levels only5
Yes
No
Yes4
VT
All coverage levels
except catastrophic
Yes
No
No6
State
FFM States
FFM = federally facilitated marketplace.
1
The federally facilitated marketplace generally allows benefit substitution. However, states with a federally facilitated marketplace may prohibit benefit
substitution for insurers in their state and without otherwise establishing standardized plans.
2
In California and Connecticut, benefit substitution is prohibited with respect to both standardized and nonstandardized plans.
3
In Massachusetts, out-of-network cost-sharing is standardized for pediatric dental coverage only.
4
In New York and Oregon, insurers are generally allowed to substitute one benefit for another within the essential health benefits. However, this practice is
prohibited with respect to standardized plans.
5
In Oregon, insurers offering plans in the individual and small-group markets both on and off the exchange are required to offer a standardized bronze plan
and a standardized silver plan. The requirement to offer a standardized gold plan only applies within the exchange.
6
In Vermont, benefit substitution is allowed. However, insurers must justify any substitution, including explaining how it supports insurer initiatives to
promote wellness and innovation and providing a survey of supporting clinical literature.
6
health benefits (primary care, specialist, and emergency
department visits; high-cost imaging; inpatient hospitalization; outpatient surgery; and prescription drugs),
allowing insurers to vary cost-sharing for less-common
services.20 Connecticut is the only state to standardize
cost-sharing for out-of-network benefits, potentially
offering consumers a gauge of their total anticipated
financial risk, given that it can be difficult to predict
out-of-network costs.21
To further limit variability in benefit design
and help consumers more easily compare health plans,
states may prohibit insurers from substituting one
benefit for another within an essential health benefit
category, such as outpatient services or prescription
drugs (a practice known as benefit substitution).22 For
example, under benefit substitution, if a state’s benchmark plan covers blood screens for ovarian cancer, an
insurer would be allowed to substitute coverage of that
service for coverage of an actuarially equivalent service
within the laboratory services category.23 Prohibitions
on benefit substitution, therefore, allow consumers to
more easily compare plans based on features such as
cost-sharing and premiums, while minimizing the need
to factor in differences in benefit design. California and
Connecticut prohibited benefit substitution in all plans
offered in the marketplace, standardized or not. New
York and Oregon prohibited changes to covered benefits in standardized plans, but allowed insurers to substitute benefits in nonstandardized plans.24 Although
they standardized cost-sharing, Massachusetts and
Vermont allowed insurers to substitute benefits within
standardized plans as well as nonstandardized plans.
Seven States and the District of Columbia
Required Insurers to Offer “Meaningfully
Different” Plans
To help consumers distinguish among plans,
seven states—California, Colorado, Connecticut,
Massachusetts, Nevada, Utah, and Vermont—and the
District of Columbia instituted meaningful difference
standards, which commonly call for state regulators to
review differences in plan features such as cost-sharing, networks, and formularies (Exhibit 5). Plans are
The Commonwealth Fund
rejected or must be modified if they are too similar to
others that the insurer proposes to sell within a given
service area and coverage level. In some cases, states
also encourage insurers to differentiate their plans
through the use of innovative plan features, as previously discussed. Initially, at least, many states provided
significant discretion to state or marketplace officials to
determine if plans were meaningfully different, without
quantifying what degree of difference in such features
as networks, formularies, or cost-sharing would be considered meaningful.
DISCUSSION
As the health insurance marketplaces under the
Affordable Care Act launch and initial technical
hurdles are overcome, consumers around the nation
will gain more information and tools to shop for health
plans in the individual and small-group markets. In an
attempt to further facilitate consumer decision-making,
many state-based marketplaces—and to a lesser extent,
the federally facilitated marketplace—are going beyond
the minimum requirements of the Affordable Care Act
to set rules to “stock the shelves” of the new marketplaces with a manageable number of easily comparable
plan choices.
In the first year of marketplace operations, consumers’ ability to make “apples-to-apples” comparisons
and select a plan that offers them the optimal level of
protection is likely to vary according to the different
approaches taken by state and federal marketplaces.
For example, limiting the number of plans each insurer
may offer may provide a more manageable number
of plans for consumers to consider, while standardizing benefit designs will further enhance consumer
choice by enabling them to better distinguish between
the plans offered on the marketplace. In addition,
the effectiveness of “meaningful difference” rules may
depend on the degree of difference demanded by such
standards and the regulators implementing them. If
state regulators or marketplace officials require insurers
to demonstrate their plans are meaningfully different
on only one criterion, such as a $50 dollar difference in
deductibles, plans may not be substantially different in
What States Are Doing to Simplify Health Plan Choice in the Insurance Marketplaces
Exhibit 5. Examples of Meaningful Plan Differences Provided in State and Federal Guidance
State
Example
1
FFM States
•
•
•
•
•
$50 or more difference in both individual and family in-network deductibles
$100 or more difference in both individual and family in-network annual out-of-pocket maximum
Difference in network
Difference in formulary
Difference in covered essential health benefits
CA2
•
•
•
Difference in network design
Difference in level of provider integration
Innovative delivery system features
CO
•
•
•
•
•
$50 difference in deductible
$100 difference in annual out-of-pocket maximum
Difference in formularies
Difference in networks and service areas
Difference in benefit design (essential health benefits, other benefits offered between plans)
CT
•
•
•
•
•
•
$50 difference in medical deductible
$50 difference in drug deductible
$100 difference in annual out-of-pocket maximum
Difference in payment structure (e.g., copayment versus coinsurance)
Difference in product type (e.g., HMO, PPO, etc.)
Difference in care management (e.g., gatekeeper model; patient-centered medical home; community health
teams; wellness programs)
DC3
•
•
•
•
•
$50 or more difference in both individual and family in-network deductibles
$100 or more difference in both individual and family in-network annual out-of-pocket maximum
Difference in network
Difference in formulary
Difference in covered essential health benefits
MA
•
•
•
Innovative plan designs that can help achieve premium cost savings for enrollees
Difference in network design (e.g., tiered or narrower networks)
Plan features intended to reduce costs through increasing transparency or efficiency (e.g., value-based
insurance designs; patient-centered medial homes)
NV
•
•
•
•
•
Difference in product type
Difference in premium and cost-sharing
Difference in network
Difference in formulary
Difference in covered benefits
UT3
•
•
•
•
•
$50 or more difference in both individual and family in-network deductibles
$100 or more difference in both individual and family in-network annual out-of-pocket maximum
Difference in network
Difference in formulary
Difference in covered essential health benefits
VT
•
•
•
•
•
•
•
•
•
Difference in medical deductible
$50 difference in drug deductible
Greater than $1,000 difference in annual out-of-pocket maximum
10 percent difference in cost-sharing for inpatient or outpatient care
$10 or 10 percent difference in cost-sharing for primary care provider or specialist office visit
$5 average difference in generic drugs
$10 or 10 percent average difference in brand-name drugs
Different payment structure (e.g., copayment versus coinsurance)
Additional rating tier offerings
FFM = federally facilitated marketplace.
1
Although not reviewed for purposes of this paper, states conducting plan management on behalf of the federally facilitated marketplace also may take
actions to manage plan choices in addition to conducting a meaningful difference review. In states not conducting plan management for the federally
facilitated marketplace, review for meaningful difference is the only action to manage plan choices in 2014.
2
In California, within a given product design, the exchange may choose not to contract with two plans with broad overlapping networks within a rating
region unless they offer different innovative delivery system or payment reform features.
3
The District of Columbia and Utah referred to the federal guidance on meaningful difference standards, which includes the examples highlighted.
7
8
practice. Even with these policies in place, insurers in
most states will still have significant freedom to shape a
portfolio of plan offerings.
The approaches we have discussed do not exist
in a vacuum; their effectiveness will be significantly
affected by the level of insurer participation in a marketplace, which in turn depends on factors such as the
state’s existing market dynamics and other marketplace
design decisions affecting insurer participation.25 For
example, marketplaces adopting limits on plan offerings may still offer dozens of plans per coverage level
if a large number of insurers participate, while marketplaces without limits may offer a smaller number of
plans if few insurers participate or voluntarily limit plan
offerings. Moreover, consumers’ experience will depend
not just on the plan choices available to them, but
also on the user-friendliness and choice architecture
of marketplace websites and their access to in-person
assistance with selecting a plan and understanding the
health insurance product they are buying.
Even with these external factors at play, differences in state and federal policymakers’ initial
approaches to facilitating consumer choice provide an
important learning opportunity for policymakers. Since
establishing its marketplace in 2006, Massachusetts
has periodically updated its approach to managing plan
choices based on feedback from consumers solicited
through focus groups and surveys as well as analysis of
consumers’ plan selections.26 Similarly, actions taken,
or not taken, by state-based marketplaces for 2014 will
serve as a starting point to analyze how different policies affect consumers’ ability to enroll in the plan most
suitable for their financial and health situations. In the
longer term, tracking consumers’ plan choices, their
satisfaction with those plans, and whether they switch
plans during future open enrollment periods could
yield additional insights into how marketplace design
decisions affect purchasing experiences.
The Commonwealth Fund
As they evaluate how well their marketplaces
are working for consumers, state and federal officials should compare the effectiveness of different
approaches to facilitating consumer choice, including
the examination of metrics such as the number and
choice of plans available, differences and similarities in
plan design, and consumers’ reviews of the shopping
experience and actual choice of plans. Over time, these
findings could help states narrow in on the optimal
number and variety of plan choices for consumers,
given their local needs and circumstances.
What States Are Doing to Simplify Health Plan Choice in the Insurance Marketplaces
About the Study
This issue brief examines policy decisions made by the 17 states (California, Colorado, Connecticut, Hawaii,
Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island,
Utah, Vermont, and Washington) and the District of Columbia that chose to establish state-based marketplaces.
For the purposes of this brief, we refer to Idaho, New Mexico, and Utah as state-based marketplaces.
However, Idaho and New Mexico operate as “supported state-based exchanges” in 2014, leveraging the federal
information technology infrastructure as they build their own systems. Utah has a “bifurcated” marketplace in
which it operates the small-business marketplace while the federal government operates the individual marketplace. In all three cases, the states can set health plan certification requirements and review plans for compliance,
although the federal government will have final authority over certification decisions for the individual marketplace in Utah. Although not reviewed for purposes of this paper, states conducting plan management on behalf
of the federally facilitated marketplace also may take actions to manage plan choices in addition to conducting a
meaningful difference review.
Our findings are based on public information—such as state laws, regulations, subregulatory guidance,
marketplace solicitations, and other materials related to marketplace development—and interviews with state regulators. The resulting assessments of state action were confirmed by state officials.
Source: S. Dash, C. Monahan, and K. Lucia, “Health Policy Brief: Health Insurance Exchanges and State Decisions,” Health
Affairs, July 18, 2013.
9
10
The Commonwealth Fund
Notes
1
K. Pollitz, E. Bangit, J. Libster et al., Coverage When
It Counts: What Does Health Insurance in California
Cover and How Do Consumers Know? (Washington,
D.C.: Georgetown University Health Policy
Institute, May 2009), http://hpi.georgetown.edu/
papers.html.
2
Pub. L. 111–148, 124 Stat. 782 (2010) §§ 1311,
1312, 1321 (codified at 42 U.S.C. §§ 13031, 18032,
18041 (2012)).
3
Pub. L. 111–148, 124 Stat. 782 (2010) § 1302
(codified at 42 U.S.C. § 18022 (2012)). We present
catastrophic coverage as a coverage level alongside
the precious metal tiers—bronze, silver, gold, and
platinum—although different rules apply. Instead
of meeting a specified actuarial value level, catastrophic plans must provide no benefits other than
three primary care visits and certain recommended
preventive services until the enrollee has incurred
the maximum out-of-pocket costs allowed under
the law. Catastrophic plans can only be sold in the
individual market, and eligibility is limited to individuals under the age of 30 or who have received an
exemption from the individual mandate based on
plan affordability or hardship.
4
L. Quincy, “Choice Architecture: Design Decisions
that Affect Consumers’ Health Plan Choices,”
Health Affairs Blog, July 13, 2012; Pub. L. 111–148,
124 Stat. 782 (2010) § 1001 (codified at 42 U.S.C.
§§ 300gg-15 (2012)).
5
J. R. Gabel, R. Lore, R. D. McDevitt et al., “More
Than Half of Individual Health Plans Offer
Coverage That Falls Short of What Can Be Sold
Through Exchanges as of 2014,” Health Affairs Web
First, May 23, 2012; K. Pollitz and L. Levitt, Health
Insurance Transparency Under the Affordable Care
Act (Washington, D.C.: Kaiser Family Foundation,
March 8, 2012).
6
See, for example, L. Quincy and J. Silas, The
Evidence Is Clear: Too Many Health Insurance Choices
Can Impair, Not Help, Consumer Decision Making
(Washington, D.C.: Consumers Union, Nov. 2012);
R. Day and P. Nadash, “Simplifying Choices Among
Health Plans: New State Insurance Exchanges
Should Follow the Example of Massachusetts,”
Health Affairs, May 2012 31(5):982–89; L. Quincy,
What’s Behind the Door: Consumers’ Difficulties
Selecting Health Plans (Washington, D.C.:
Consumers Union, Jan. 2012); Blue Cross Blue
Shield of Massachusetts Foundation, Health Reform
Toolkit Series: Determining Health Benefit Designs
to Be Offered on a State Health Insurance Exchange
(Boston: BCBSMA, Nov. 2011); J. M. McWilliams,
C. C. Afendulis, T. G. McGuire et al., “Complex
Medicare Advantage Choices May Overwhelm
Seniors—Especially Those with Impaired Decision
Making,” Health Affairs, Sept. 2011 30(9):1786–94;
E. O’Brien and J. Hoadley, Medicare Advantage:
Options for Standardizing Benefits and Information
to Improve Consumer Choice (New York: The
Commonwealth Fund, April 2008); G. Dallek and
C. Edwards, Restoring Choice to Medicare+Choice:
The Importance of Standardizing Health Plan Benefit
Packages (New York: The Commonwealth Fund,
Oct. 2001); and J. Hoadley, Medicare Part D:
Simplifying the Program and Improving the Value
of Information for Beneficiaries (New York: The
Commonwealth Fund, May 2008).
7
See, for example, S. Iyengar and M. Lepper, “When
Choice Is Demotivating: Can One Desire Too
Much of a Good Thing?” Journal of Personality and
Social Psychology, Dec. 2000 79(6):995–1006.
8
S. Dash, K. Lucia, K. Keith et al., Implementing the
Affordable Care Act: Key Design Decisions for StateBased Exchanges (New York: The Commonwealth
Fund, July 2013).
9
The District of Columbia Health Benefits
Authority expects to require insurers to offer standardized plans beginning in 2015. D.C. Health
Benefit Exchange Authority, Carrier Reference
Manual v.5 (Washington, D.C.: Health Benefit
Exchange Authority, June 2013).
What States Are Doing to Simplify Health Plan Choice in the Insurance Marketplaces
10
U.S. Department of Health and Human Services,
Centers for Consumer Information and Insurance
Oversight, Letter to Issuers on Federally Facilitated
and State Partnership Exchanges (Washington, D.C.:
Department of Health and Human Services, April
5, 2013); and The Center for Medicare Advocacy,
The Obama Administration’s 2010 Call Letter for
Medicare Advantage and Prescription Drug Plans:
Implications for Beneficiaries (Washington, D.C.:
The Henry J. Kaiser Family Foundation, May
2009). In 2010, the Centers for Medicare and
Medicaid Services adopted new policies to facilitate beneficiary decision-making between plans,
such as encouraging Medicare Advantage and Part
D plan sponsors to eliminate plan options that are
duplicative of other plan offerings or that have low
enrollment.
11
Personal correspondence with exchange official,
Rhode Island Health Benefit Exchange, May 14,
2013 (on file with authors).
12
Personal correspondence with exchange official,
Washington Health Benefit Exchange, May 17,
2013 (on file with authors).
13
Personal correspondence with exchange official,
Vermont Health Benefit Exchange, May 14, 2013
(on file with authors); and personal correspondence
with exchange official, Oregon Health Insurance
Exchange, May 13, 2013 (on file with authors).
14
Personal correspondence with exchange official,
New York Health Benefit Exchange, May 15, 2013
(on file with authors).
15
Personal correspondence with exchange official,
Silver State Health Insurance Exchange, May 15,
2013 (on file with authors).
16
California Health Benefit Exchange, 2012–2013
Initial Qualified Health Plan Solicitation to Health
Issuers and Invitation to Respond (Sacramento, Calif.:
California Health Benefit Exchange, revised Jan. 16,
2013).
17
Commonwealth Health Insurance Connector
Authority, Request for Responses: Health Benefit
Plans—Seal of Approval (Boston: Health Connector,
Feb. 15, 2013); and Commonwealth Health
Insurance Connector Authority, Final Bidders
Conference Questions (Boston: Health Connector,
March 8, 2013).
11
18
Personal correspondence with exchange official,
Maryland Health Benefit Exchange, May 15, 2013
(on file with authors); Office of the New York
Health Benefit Exchange, Invitation to Participate in
the New York Health Benefit Exchange (Albany, N.Y.:
New York Health Benefit Exchange, Jan. 31, 2013);
and Vermont Health Connect, Request for Proposals:
Selection of Qualified Health Plans (Williston, Vt.:
Vermont Health Connect, Nov. 1, 2012).
19
Value-based insurance design is an approach to
health insurance that reduces consumer cost-sharing
for items and services that are deemed high value
because the clinical benefits outweigh the costs
or risks and increases cost-sharing or items and
services of low or uncertain value. With tiered
provider networks, providers are grouped by tier
based on their average cost and/or quality of care
and health insurers vary consumer cost-sharing for
certain services depending on their providers’ tier.
S. Corlette, D. Downs, C. Monahan et al., “State
Insurance Exchanges Face Challenges in Offering
Standardized Choices Alongside Innovative ValueBased Insurance,” Health Affairs, Feb. 2013 32(2):
418–26.
20
Commonwealth Health Insurance Connector
Authority, Request for Responses: Health Benefit
Plans—Seal of Approval, 2013.
21
K. Kyanko, L. Curry, and S. Busch, “Outof-Network Physicians: How Prevalent Are
Involuntary Use and Cost Transparency?” Health
Services Research, June 2013 48(3):1154–72.
22
In all states allowing benefit substitution, insurers
must comply with the federal government’s minimum rules for substituting benefits, including that
the substitute benefit is actuarially equivalent to the
benefit that is being replaced, as certified by a member of the American Academy of Actuaries, and that
it is within the same benefit category. 45 C.F.R. §
156.115. States may adopt additional rules as well.
In Vermont, for example, insurers must also explain
how any substitutions support insurer initiatives,
such as innovation and wellness, and, if they elect to
not provide a service and related quantitative limits, they must submit a survey of clinical literature
supporting the substitution of the service. Vermont
Health Connect, Request for Proposals: Selection of
Qualified Health Plans, 2012.
12
The Commonwealth Fund
23
S. Corlette, K. W. Lucia, and M. Levin,
Implementing the Affordable Care Act: Choosing an
Essential Health Benefits Benchmark Plan (New York:
The Commonwealth Fund, March 2013).
24
While substitution is prohibited outright in standardized plans in New York, insurers may only
substitute benefits within the preventive, wellness,
and chronic disease management and rehabilitative
and habilitative services categories in nonstandardized plans. New York Health Benefit Exchange,
Invitation to Participate in the New York Health
Benefit Exchange, 2013.
25
S. Dash, K. Lucia, K. Keith et al., Implementing the
Affordable Care Act: Key Design Decisions for StateBased Exchanges (New York: The Commonwealth
Fund, July 2013).
26
Blue Cross Blue Shield of Massachusetts
Foundation, Health Reform Toolkit Series:
Determining Health Benefit Designs to Be Offered on a
State Health Insurance Exchange, 2011.
What States Are Doing to Simplify Health Plan Choice in the Insurance Marketplaces
13
About the Authors
Christine H. Monahan is a student at Yale Law School. Prior to attending Yale, she worked as a senior health policy analyst at the Georgetown University Health Policy Institute’s Center on Health Insurance Reforms, focusing
on state and federal implementation of health insurance marketplaces and the regulation of private health insurance. Previously, she worked as a health policy advisor at the National Partnership for Women & Families.
Sarah J. Dash, M.P.H., is a research fellow at the Georgetown University Health Policy Institute’s Center on
Health Insurance Reforms, where her principal research focus is comprehensive monitoring of state health insurance marketplace implementation. She also focuses on the intersection of public and private health insurance with
delivery system reforms. Previously, she was a senior health policy aide on Capitol Hill. Dash earned her master’s
degree in public health from Yale University.
Kevin W. Lucia, J.D., M.H.P., is a senior research fellow at the Georgetown University Health Policy Institute’s
Center on Health Insurance Reforms. He focuses on the regulation of private health insurance, with an emphasis
on analyzing the market reforms implemented by federal and state governments in response to the Affordable
Care Act. Lucia received his law degree from the George Washington University School of Law and his master’s
degree in health policy from Northeastern University.
Sabrina Corlette, J.D., is a senior research fellow at the Georgetown University Health Policy Institute’s Center
on Health Insurance Reforms. Her areas of focus include state and federal regulation of private health insurance
plans and markets, and implementation of new rules for insurance markets under the Affordable Care Act. She
serves as a consumer representative to the National Association of Insurance Commissioners, and was appointed
to its Consumer Information Workgroup. She received her law degree from the University of Texas at Austin.
Acknowledgments
The authors thank the state marketplace and insurance department officials who shared their time to review
our findings and offer valuable comments. We further thank Jack Hoadley and Lynn Quincy for their thorough
review and feedback.
Editorial support was provided by Martha Hostetter.
www.commonwealthfund.org